Biofuels gain momentum as market conditions shift
The ongoing conflict in the Middle East, alongside the reduction of flows through the Strait of Hormuz, has sparked large scale disruptions to global energy supply. Prices increased sharply at the start of the conflict, with Brent crude briefly remaining north of $100 a barrel before fluctuating in a wide range, at times dipping to $85/bbl. Refining activity has also been impacted with many halting or reducing production.
While conventional fuel oil trends upwards, the price spread between conventional fuels and biofuels has narrowed considerably. In some cases, B100 has traded close to parity with LSMGO and has even been reported below conventional
gasoil levels. While biodiesel can still sometimes appear higher on a per-tonne basis, the overall voyage cost is still approaching parity.
This marks a notable shift from previous market conditions, where biofuels consistently carried a significant premium. Improvements in feedstock availability, supply chains and market maturity are supporting this change, making biofuels a more commercially viable option across a wider range of operating conditions.
Unlike conventional fuel, biofuel prices are influenced by agricultural feedstock supply, policy incentives and regional supply chains. This positions biofuels as an increasingly reliable energy solution.
While the exact duration of the conflict and sustained volatility is hard to predict, this shift in pricing dynamics warrants a re-evaluation of fuel strategies, particularly for operators exposed to European regulation.
For those operating in Europe, regulatory frameworks such as EU ETS and FuelEU Maritime can further support the business case for biofuels by reducing exposure to carbon costs and supporting compliance targets. With the scope of EU ETS increasing from 70% to 100% in 2026, aligning fuel choice with compliance strategy is becoming increasingly important.
In this environment, aligning fuel choice with compliance strategy is critical. Whether operating in the spot market, trading forward, or using structured approaches such as limit orders, operators who take a holistic view can unlock meaningful commercial advantages.
In UK there are many business hoping that the Government will wake up and support their introduction. Indeed
Hydrotreated Vegetable Oil, a drop in replacement for diesel or kerosene for home heating is ready to take off….. if the government taxes it in the same way that it does for heating oil!
More information at https://kpioceanconnect.com/biofuels-gain-momentum-as-market-conditions-shift/